By Tobias Puehse, Vice President of Nielsen’s Innovation Practice in Southeast Asia, North Asia and Pacific and Sonia Kapoor, Director, Thought Leadership and Knowledge Management

With buoyant economies, burgeoning populations and a fast-growing middle class segment, Asia is ripe with growth prospects and is consequently constantly attracting new players in the product innovation game. Energy and enthusiasm from product innovators across the region is so intense, in fact, that it’s on par with, and in some markets surpassing levels in leading innovation markets like the U.S.

Even as innovation proliferates, however, Asian consumers are typically wary of new products and services, and most won’t try something new until it’s been market tested. In fact, close to two-thirds of consumers (62%) in Asia Pacific would rather wait for an innovation to prove itself before purchasing according to Nielsen’s Q3 2012 global survey data. Adoption rates within specific markets vary, however, ranging from just over 50 percent to 75 percent. In developing markets such as Vietnam, Indonesia and Philippines, resistance to trying new innovations is particularly high (76%, 75% and 74% respectively), compared with just 52 percent in Japan.

Much of the caution regarding new products stems from a shared culture in many Asian markets that often skews toward risk aversion and conservatism. Average Asian consumers view brand relationships as long‐term investments and they think deeply about newly introduced brands and products. That involves spending time evaluating a product’s tangible benefits, which makes them less likely to buy something as soon as it hits the shelves. The path to purchase for innovation is, therefore, a long one, as consumers need to understand and evaluate brands or categories through research and opinion-gathering before they try them.

Given the rise in innovation in Asia and existing consumer tendencies regarding new products, Nielsen recently analysed various new product introductions in Asia to seek out ways to improve the chance of success. Nielsen’s analysis included brand re-launches, line extensions, new pack introductions and new brand entrants. From this analysis, we identified five key ways to succeed with innovation in Asia.

1. Ensure that innovation plans line up with market opportunities

For every successful new product, hundreds fail. Innovation failure rates can be as high as 90 percent in some markets and categories, highlighting the risk of wasted innovation. In order to minimise this waste, companies need to have a deep understanding of unmet consumer needs and local market dynamics. Companies must gauge innovation activity levels, latent consumer demand and category growth potential to ensure that the nature and pace of innovation is in line with real opportunities.

2. Design concepts based on compelling propositions rather than low price

Value is a strong driver of innovation success, but it’s not a silver bullet for success. It’s also less likely to be a chief criterion among consumers going forward, which makes focusing solely on price to attract consumers inherently risky. In any given category there can only be one cost leader, and constant play for lowest price through promotional efforts can erode brand image and perception of quality. Companies that focus on proving value through relevant and advantageous propositions have proven most successful over time.

3. Leverage brand attributes that build loyalty

For the moment, large global brands have the upper hand in most Asian markets because consumers largely perceive them as superior to local brands on quality, durability and status. There are signs that these perceptions are shifting, however, and interesting contrasts are apparent in markets like the Philippines and Indonesia, where consumers are showing a stronger preference for new products from local brands—a sign that foreign brands may not be addressing local needs. In the not too distant future, being global or local will matter less, and all companies will need to rely on other attributes to build brand loyalty, such as wide presence, innovative product benefits, superior technology and quality packaging.

4. Fast-track online inclusion in media plans

The rise of digital media in Asia is reaching a fever pitch, and mobile device ownership is growing exponentially, opening up new and exciting avenues for brands to engage with Asian consumers. Digital platforms such as internet search engines, frequently visited website posts and brand/manufacturer websites can significantly influence new product purchasing decisions. Around 60 percent of online Asian consumers visit various sites for new product information, 10 percentage points higher than U.S. consumers.

5. Be bold with your distribution strategy

In order for consumers to try new products, they must be widely available. And in order to ensure availability, companies need to sustain distribution support for at least two years to ensure the success of new innovations. Traditional trade still holds the lion’s share of the retail sector in most Asian markets, and this is unlikely to change in the short term. So while new brand launches are easier to support in modern trade stores, the wide reach that traditional trade affords is an important consideration.

With Asia now widely recognised as the growth engine of the future, companies looking to invest in innovation need to address critical success factors for the region and ensure their communications engage consumers and compel them to risk trial. The right strategy requires a local understanding of what works in Asia and in-depth consumer insights to successfully activate new product propositions and achieve breakthroughs.